An Introduction to

Linear Programming
 Decision Problems
Four elements:
 Alternatives
 Uncertainty
 Consequences
 Criterion/criteria
 Decision Problems
 Anthony’s Framework
• Strategic Planning
 Long planning horizons, long term and

extremely important consequences, very

broad scope
• Tactical Planning
 Effective allocation of resources, medium

range time horizon

• Operations Control
 Day-to-day operational and scheduling

decisions
 Decision Problems

 Model based Decisions for business involve

rational approaches to decision making based
on the analytical method of problem solving.
 This body of knowledge is often referred to as
management science, operations research or
decision science.
 It had its early roots in World War II and is
flourishing in business and industry with the
aid of computers.
 Advantages of Analytical or
Mathematical Models
 Generally, analytical or mathematical
models:
• require less time
• are less expensive
• involve less risk
• provide learning experience (trial and error)
• enable future projections
• Allow to test assumptions
 Mathematical Models

 Cost/benefit considerations must be made in

selecting an appropriate mathematical model.
 Frequently a less complicated (and perhaps
less precise) model is more appropriate than a
more complex and accurate one due to cost
and ease of solution considerations.
 Mathematical Models
 Attempt to replicate the behavior of real
systems.
 Frequently seek to maximize or minimize some
objective function subject to constraints.
 Are said to be stochastic if any of the
uncontrollable inputs is subject to variation,
otherwise are said to be deterministic.
Stochastic models are more difficult to analyze.
 The values of the decision variables that
provide the mathematically-best output are
referred to as the optimal solution for the
model.
 Model Testing and Validation
 Often, the goodness/accuracy of a model cannot be
assessed until solutions are generated.
 Small test problems having known, or at least
expected, solutions can be used for model testing
and validation.
 If the model generates expected solutions:
• use the model on the full-scale problem.
 If inaccuracies or potential shortcomings inherent
in the model are identified, take corrective action
such as:
• collection of more-accurate input data
• modification of the model
 Linear Programming (LP)
Problem
 A mathematical programming problem is one
that seeks to maximize (or minimize) an objective
function subject to constraints.
 If both the objective function and the constraints
are linear, the problem is referred to as a linear
programming problem.
 Linear functions are functions in which each
variable appears in a separate term raised to the
first power and is multiplied by a constant
(which could be 0).
 Linear constraints are linear functions that are
restricted to be "less than or equal to", "equal to",
or "greater than or equal to" a constant.
 Problem 1
Automotive Products Ltd. manufactures two auto-components,
Cam shaft (C1) and Pump Shaft (C2), which are used in the
automobile industry. Each unit of C1 requires 3 hours of
machining on a special lathe and 3 hours of assembly, while each
unit of C2 requires 2 hours of machining and 1 hour of assembly.
The two components C1 and C2 also require special grade alloy
steel of 1 kg and 3 kg respectively. The Company has 300 kg of
special grade alloy steel available. The total machine and
assembly hours available are 240 and 180 respectively.
The respective profit contributions are: $25 per unit of C1 and $18
per unit of C2. Formulate the above as a linear programming
problem. DO not solve the problem.
 LP Formulation: Problem 1
Max z = 25x1 + 18x2
s.t.
3x1 + 2x2 < 240
3x1 + x2 < 180
x1 + 3x2 < 300
x1 , x2 > 0
Steps for LP Problem Formulation
 LP Problem formulation is the process of
modeling a real decision problem into a
mathematical problem having the structure of a
Linear Program.
 Steps in Formulation of an LP:
1) Define the decision variables.
2) Write the linear objective function in terms
of the decision variables.
3) Write the linear constraints in terms of the
decision variables.
4) Include the non-negativity constraints.
 Problem 2
Automotive Components Ltd. manufactures 3 components, C1, C2
and C3, which are used in the automobile industry. Each unit of C1
requires 3 hours machining on a special lathe and 2 hours of
assembly, each unit of C2 requires 2 hours of machining and 1 hour
of assembly and each unit of C3 requires 5 hours of machining and
3 hours of assembly. The three components C1, C2 and C3 also
require special grade alloy steel of 2 kg, 1 kg and 3 kg respectively.
The Company has 300 kg of special grade alloy steel available.
The total machine and assembly hours available are 240 and 180
respectively.
The profit contribution per unit are: $25 for C1; $18 for C2; and $20
for C3. The company has earlier agreed to supply a minimum of 15
components of C2 to one of the automobile manufacturers under a
contract. Formulate the above as an LP.
 LP Formulation: Problem 2

Decision variables: We begin by determining the

decisions that must be made by the decision maker:
how much of each component should be produced
in the planning period. Thus, we define the decision
variables:
x1 = units of comp C1 to be produced in the plg period
x2 = units of comp C2 to be produced in the plg period
x3 = units of comp C3 to be produced in the plg period
 LP Formulation: Problem 2
Objective function: The objective is to maximize the
profit by maximizing the total contribution in the
planning period. The total contribution may be
determined from the following relation:
Total contribution = (contribution from C1) +
(contribution from C2) + (contribution from C3)
Thus, the objective function is:
Max z = 25x1 + 18x2 + 20x3
 LP Formulation: Problem 2
Constraints: the decision variables must satisfy the
following four constraints:
Constraint 1: total machining hours used cannot exceed
240
Constraint 2: total assembly hours used cannot exceed 180
Constraint 3: kg of alloy steel used cannot exceed 300
Constraint 4: at least 15 units of C2 must be produced
Therefore, constraint 1 would mean that total machining
hours used = 3x1 + 2x2 + 5x3 cannot be greater than 240
In the same way the other three constraints can be
formulated.
 LP Formulation: Problem 2
The four constraints are:
3x1 + 2x2 + 5x3 ≤ 240
2x1 + x2 + 3x3 ≤ 180
2x1 + x2 + 3x3 ≤ 300
x2  15
Non-negativity constraints: it is clear that all
decision variables being units to be produced
cannot be negative, i.e., x1  0, x2  0, x3  0
 LP Formulation: Problem 2

The complete formulation is:

Max z= 25x1 + 18x2 + 20x3
s.t.
3x1 + 2x2 + 5x3 ≤ 240
2x1 + x2 + 3x3 ≤ 180
2x1 + x2 + 3x3 ≤ 300
x2 ≥ 15
x1 , x2 , x3 ≥ 0
 Problem 3: The Diet Problem
Basic Food Group
Food Item Cost Calories Chocolate Sugar Fat

Brownie $0.50 400 3 oz. 2 oz. 2 oz.

Chocolate ice cream (1

$0.20 200 2 2 4
scoop)

Cola (1 bottle) $0.30 150 0 4 1

Pineapple cheesecake
$0.80 500 0 4 5
(1piece)

Minimum intake 500 6 oz. 10 oz. 8 oz.

 LP Formulation: Problem 3

Decision variables: as always, we begin by

determining the decisions that must be made by the
decision maker: how much of each food type
should be eaten daily. Thus, we define the decision
variables:
x1 = number of brownies to be eaten daily
x2 = number of scoops of chocolate ice cream to be
eaten daily
x3 = number of bottles of cola to be drunk daily
x4 = number of pieces of pineapple cheesecake to be
eaten daily
 LP Formulation: Problem 3
Objective function: my objective function is to
minimize the cost of my diet. The total cost of my
diet may be determined from the following
relation:
Total cost of diet = (cost of brownies) + (cost of ice
cream) + (cost of cola) + (cost of cheesecake)
Thus, the objective function is:
Min z = 0.50x1 + 0.20x2 + 0.30x3 + 0.80x4
 LP Formulation: Problem 3
Constraints: the decision variables must satisfy the
following four constraints:
Constraint 1: daily calorie intake must be at least 500
calories.
Constraint 2: daily chocolate intake must be at least 6 oz.
Constraint 3: daily sugar intake must be at least 10 oz.
Constraint 4: daily fat intake must be at least 8 oz.
Therefore, the daily calorie intake = 400x1 + 200x2 + 150x3
+ 500x4 must be greater than 500 ounces
In the same way the other three constraints can be
formulated.
 LP Formulation: Problem 3
The four constraints are:
400x1 + 200x2 + 150x3 + 500x4  500
3x1 + 2x2  6
2x1 + 2x2 + 4x3 + 4x4  10
2x1 + 4x2 + x3 + 5x4  8
Non-negativity constraints: it is clear that all
decision variables are restricted in sign, i.e., xi  0,
for all i = 1, 2, 3, and 4
 LP Formulation: Problem 3

The complete formulation is:

Min z = 0.50x1 + 0.20x2 + 0.30x3 + 0.80x4
s.t.
400x1 + 200x2 + 150x3 + 500x4 ≥ 500
3x1 + 2x2 ≥ 6
2x1 + 2x2 + 4x3 + 4x4 ≥ 10
2x1 + 4x2 + x3 + 5x4 ≥ 8
x1 , x2 , x3 , x4 ≥ 0
 Problem 4: Loan Portfolio Problem
The Urban Savings & Loan Co. offers four types of loans. The
interest on loans (in per cent) for each type is specified below:
House mortgage loan 8%
Motor car loans 12%
Home furnishing loans 10%
Personal loans 15%
The company’s policy and the governmental regulations stipulate
that the personal loans cannot exceed 10 per cent of the total
amount of loans, and that the personal and home furnishing loans
together should not exceed 15 per cent of the total amount of
house mortgage and motor car loans, and the motor car loans
must be at least 25 per cent of the total amount of loans. The
amount available for loans is $2 millions.
Problem 4: Loan Portfolio Problem

Max z= 0.08x1 + 0.12x2 + 0.10x3 + 0.15x4

s.t.
x1 + x2 + x3 + x4 ≤ 2,000,000
x4 ≤ 0.1(x1 + x2 + x3 + x4 )
x3 + x4 ≤ 0.15(x1 + x2)
x2 ≥ 0.25(x1 + x2 + x3 + x4 )
x1 , x2 , x3 , x4 ≥ 0
 Problem 4: Loan Portfolio Problem

We may rewrite the formulation as:

Max z = 0.08x1 + 0.12x2 + 0.10x3 + 0.15x4

s.t.
x1 + x2 + x3 + x4 ≤ 2,000,000
-0.1x1 - 0.1x2 - 0.1x3 + 0.9x4 ≤ 0
-0.15x1 - 0.15x2 + x3 + x4 ≤ 0
-0.25x1 + 0.75x2 - 0.25x3 - 0.25x4 ≥ 0
x1 , x2 , x3 , x4 ≥ 0
 Linear Programming
Assumptions
(i) proportionality

(ii) additivity linearity

(iii) divisibility

(iv) certainty
 Explanation of LP
Assumptions

(i)The objective function and each of the constraints

are linear functions of the decision variables
(volume discounts, set-up charges, and nonlinear
efficiencies are potential sources of violation)
(ii) “cross terms” or “cross products” such as x1x5
may not appear in the objective or constraints
 Explanation of LP
Assumptions
(iii) Fractional values for decision variables are
permitted
(iv) The objective function and the constraints
are known with certainty
• Nonlinear or integer programming models
should be used when some subset of
assumptions (i), (ii) and (iii) are not satisfied.
• Stochastic models should be used when a
problem has significant uncertainties in the
data that must be explicitly taken into
account [a relaxation of assumption (iv)].